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Suspect was on campus, The second suspect in the Boston Marathon bombing is believed to be "surrounded" after gunfire broke out from a boat or shed behind a house in the Watertown section of Boston.

Sources told Fox News a suspect was "down," but later said he was alive and surrounded. A neighbor described the sound of as many as 30 shots as akin to "a roll of firecrackers shooting off," and said blood was found on the door of a shed, or on a trailered boat near it behind a home on Franklin Street.

"All hell broke loose," the neighbor told a MyFox Boston reporter.

Sources told Fox News the shed and the boat had been searched earlier, but a woman noticed a door to it had been opened, saw blood and called police. The gunfire broke out when police went to search it, but it was unclear if any police were injured.

A robot was being used to search the area, police were massing at the scene and an ambulance rushed to the area in a dramatic development came just after police said their hunt for Dzhokhar Tsarnaev had gone cold and urged people to "go about your business."

Early in the day, police told residents of several city neighborhoods, especially Watertown, to stay inside. School was canceled, bus and train service suspended and people were even told not to venture out for work. But those restrictions were lifted at the news briefing Friday night about 15 minutes before the gunshots were heard.

If Tsarnaev was hiding in the boat, it means he hid all day within the tight perimeter where Black Hawk helicopters patrolled the sky and police went door-to-door hunting for him. Police say he and his older brother, Tamerlan Tsarnaev placed the deadly bombs at the race. The sibling suspects are from Dagestan, a province in Russia that borders Chechnya, but have been in the U.S. for as much as a decade..

On Thursday night, hours after the radicalized Muslims were fingered by the FBI and their images circulated around the world, they killed a Massachusetts Institute of Technology police officer and carjacked an SUV from a man who later escaped. The brothers led police on a chase through city streets that included a wild shootout and the suspects hurling explosives from the SUV. Bizarrely, police discounted earlier reports that the brothers had robbed a 7/11, saying although it had been robbed, and they had been caught on surveillance video, they were not the robbers.

The pursuit went into Watertown, where Tamerlan Tsarnaev, 26, was shot several times in the gunfight. But Dzhokhar Tsarnaev somehow slipped away, running over his already wounded brother as he fled by car, according to two law enforcement officials who spoke to The Associated Press on condition of anonymity. Tamerlan Tsarnaev was pronounced dead at a hospital Friday morning. But at some point following the shootout and car chase, the younger brother fled by foot, according to State Police, who said Friday night they don't believe he now has access to a car.